Why in News?

The first official gauge of the economy’s performance so far in 2024-25 has been recently released by the Reserve Bank of India (RBI).

What’s in Today’s Article?

• Highlights of the RBI’s Report
• Bright Spots in India’s Economy’s Performance
• Indian Economy’s Challenges and Way Ahead

Highlights of the RBI’s Report:

• Gross Domestic Product (GDP) growth:
  • 
  • Earlier this month, the RBI reduced its Q1 GDP forecast from 7.2% to 7.1%.
  • The RBI anticipates 7.2% GDP growth through 2024–2025 after last year's 8.2% surge.
• Growth in the Gross Value Added (GVA):
  • For the first time in a year, growth in the real GVA in the economy outperformed GDP growth, with a 6.8% uptick in the first quarter (Q1) of 2024-25.
  • This GVA growth in Q1 has been driven by significant growth in the Secondary Sector (8.4%), comprising construction, utility services (such as electricity, gas, water supply) and manufacturing sectors.
• Employment generation:
  • India provisionally created 46.7 million jobs in the financial year ended March 2024, taking the country's total employment to 643.3 million.
  • The country's employment growth rate stood at 6% in that fiscal year, versus 3.2% in the previous fiscal year.
• Bank credit growth:
  • Credit to agriculture and allied activities remained robust, registering a growth of 18.1% at Rs 21.55 lakh crore in July 2024, compared with 16.7% a year ago.
  • Credit growth to industry strengthened significantly at 10.2% to Rs 37.05 lakh crore in July 2024 compared with 4.6% in July 2023.
  • Credit growth to services sector moderated to 15.4% in July 2024 from 19.7% a year ago, primarily driven down by relatively lower credit growth in non-banking financial companies (NBFCs) and trade segments.

Bright Spots in India’s Economy’s Performance:

• Normal monsoon: It will boost farm sector output and ease inflation, which could lift the weak rural demand and private consumption.
• Private investment: Increased demand would lessen the need for government expenditure to support growth by encouraging private firms to invest in new capacities.

Indian Economy’s Challenges and Way Ahead:

• The prolonged general election has severely hindered public capital expenditure, and the government will have to work even harder to reach its spending targets.
• The policymakers need to urgently pursue meaningful reforms across all aspects of the economy, and improve the efficiency of its institutions and the judiciary.
• This is critical to lift its growth potential and fulfill hopes of creating gainful employment for its young, fast enough for India’s demographics to yield a dividend.